FRM一级习题集经典题：风险管理基础

1、1 Jennifer Durant is evaluating the existing risk management system of Silverman Asset Management. She is asked to match the following events to the corresponding type of risk. Identify each numbered event as a market risk, credit risk, operational risk, or legal risk event.Event:1. Insufficient tra

2、ining leads to misuse of order management system.2. Credit spreads widen following recent bankruptcies.3. Option writer does not have the resources required to honor a contract.4. Credit swaps with counterparty cannot be netted because they originated in multiple jurisdictions.A. 1: legal risk, 2: c

3、redit risk, 3: operational risk, 4: credit riskB. 1: operational risk, 2: credit risk, 3: operational risk, 4: legal riskC. 1: operational risk, 2: market risk, 3: credit risk, 4: legal riskD. 1: operational risk, 2: market risk, 3: operational risk, 4: legal risk1. Answer: CInsufficient training le

4、ad to misuse of order management system is an example of operational risk.Widening of credit spreads represents an increase in market risk. An option writer not honoring the obligation in a contract is a credit risk event. When a contract is originated in multiple jurisdictions leading to problems w

5、ith enforceability, there is legal risk.2 There are many reasons why risk management increases shareholder wealth. Which of the following risk management policies is least likely to increase shareholder wealth?A. Hedging strategies to lower the probability of financial distress and bankruptcy.B. Ris

6、k management policies designed to reduce the probability of debt overhang. C. Well-designed compensation structure for managers that sets incentives for managers to take appropriate risks.D. Risk management policies to eliminate projects with high volatility.2. Answer: DThe first three are examples

7、of where risk management can increase firm value. The last one is invalid because eliminate projects with high volatility may eliminate projects with extremely high payoffs.3 Which of the following statements regarding risk and risk management is correct?A. Risk management is more concerned with une

8、xpected losses versus expected losses.B. There is a relationship between the amount of risk taken and the size of the potential loss.C. The final step of the risk management process involves developing a risk mitigation strategy.D. If executed properly, the risk management process may allow for risk

9、 elimination within an economy.3. Answer: ARisk management is more concerned with the variability of losses, especially ones that could rise to unexpectedly high levels or ones that suddenly occur that were not anticipated (unexpected losses).4 Which of the following statements regarding the role of

10、 the firms audit committee is most accurate?A. At least one member of the audit committee must possess sufficient financial knowledge.B. The audit committee may consist of some members of the management team.C. The audit committee is only responsible for the accuracy of the financialstatements.D. Th

11、e audit committee is meant to work dependently with management.4. Answer: BThe audit committee consists primarily of non-management members but there may be some management members, (e.g., chief financial officer). The audit committee could work with management members but should keep independent wi

12、t Kthem.5 A board of directors is evaluating the implementdton of a new ERMPrcQfamt an asset management company. Which staterrM btowis cnsteteh of the fdfowftg is str / true about the standard version of the capital asset缄cgmocteHc朗防？A Thft SecMrW(SML) states that the expected return on any security

13、 is惘 rtekftSS itteOf irtrest plus the market price of risk times the amount of risk 5the securityp/tfolio. If CAPMjs va汕then the return of a high-beta should be higher than the returnof a low- beta stock over the next calendar year, or for that matter, any given calendar year.Q All other things bein

14、g equal, the security market line (SML) implies that higher non- systematic (aka, idiosyncratic) risk will produce higher expected returns.D、While CAPM characterizes equilibrium in terms of rate of return, it cannot be similarly extended to prices.12. Answer: AB is false. Invariably, when a group of

15、 investors is first exposed to the CAPM, one or more investors w川 find a high- Beta stock that last year produced a smaller return than low- Beta stocks. The CAPM is an equilibrium relationship. High- Beta stocks are expected to give a higher return than low- Beta stocks because they are more risky.

16、 This does not mean that they will give a higher return over all intervals of time. In fact, if they always gave a higher return, they would be less risky, not more risky, than low- Beta stocks. Rather, because they are more risky, they will sometimes produce lower returns. However, over long period

17、s of time, they should on the average produce higher returns.C is false and it is important in the CAPM. One of the greatest insights that comes from this equation arises from what it states is unimportant in determining return. The risk of any stock could be divided into systematic and unsystematic

18、 risk. Beta was the index of systematic risk. This equation validates the conclusion that systematic risk is the only important ingredient in determining expected returns and that nonsystematic risk plays no role. In other words, the investor gets rewarded for bearing systematic risk. It is not tota

19、l variance of returns that affects expected returns, but only that part of the variance in returns that cannot be diversified away. This result has great economic intuition for, if investors can eliminate all nonsystematic risk through diversification, there is no reason they should be rewarded, in

20、terms of higher return, for bearing it. All of these implications of the CAPM are empirically testable.D is obviously false as the it can be extended to prices.13 Which of the following is a DIFFERENCE between the capital asset pricing model (CAPM) and the capital market line (CML)A. The CML does no

21、t include the risk-free asset, but CAPM does.B. CAPM is a special case of the CML, where the portfolio is diversified andefficient.C. In CAPM, risk is systematic (beta) since it can apply to inefficient portfolios; but in CML, risk is total (volatility) since it only includes efficient portfolios.D.

22、 CAPM assumes the portfolio is diversified and efficient, but CML allows for undiversified and/or inefficient portfolios.13. Answer: CIn regard to B, the inverse is true: CML is a special case of SML (CAPM) where the portfolio is efficient and perfectly correlated to the market portfolio.14 In regar

23、d to the combination of two assets in the mean-variance framework, each ofthe following is true EXCEPT:A. The lower (i.e., closer to -1.0) the correlation coefficient between assets, all other attributes held constant, the higher the payoff from diversification.B. The combinations of two assets can

24、never have more risk than that found on a straight line connecting the two assets in expected return standard deviation space.C. The combinations of two assets, assuming no short selling, can never have less risk than the least risky asset in the portfolio.D. When two assets are combined in a portfo

25、lio, there always exists a simple expression for finding the minimum variance portfolio.14. Answer: CThe combinations of two assets, assuming no short selling, can have less risk than the least risky asset in the portfolio.For example, if sigma(a) = 10% and sigma(b) = 20%, then any correlation less

26、than 0.5 allows for portfolios with volatility less than 10%, without short selling; e.g., at rho = 0.1, the minimum variance portfolio occurs at 82.6% invested in asset(a) for a portfolio volatility of 9.28%.15 In regard to multi-factor models, including the arbitrage pricing model (APT), each ofth

27、e following is true EXCEPT:A. A disadvantage of APT models, in general, is the curse of dimensionality, which means k factors requires the identification of k*(k+1 )/2 values.B. A multi-factor risk model is likely to employ fewer factors than a multi-factor alpha (i.e., expected return) model.C. APT

28、 has advantages in flexibility over CAPM: APT is more flexible; does not require that returns are normally distributed; and merely assumes investors are risk-averse.D. The factor sensitivities (betas) in APT are equal to Covariance(securitys return, factor risk premium)/Variance(factor risk premium)

29、.15. Answer: AThe curse of dimensionality is associated with the covariance matrix; but the reviewed APT/multifactor models SOLVE the curse by assuming factors are uncorrelated.In regard to B, C and D, each is TRUE.In regard to D, this is analogous to CAPMs beta.16 Instead of residual-based informat

30、ion ratio (IR), it is also acceptable to compute information ratio (IR) based on active returns. The following table displays twelve (12) months of returns comparing a portfolio (P) to its benchmark (B); the final column shows the difference each month:Port- Bench-Monthfolio (P)mark (B)(P-B)13.58%2.

31、20%1.38%2-4.60%-4.50%-0.10%35.28%3.27%2.01%49.40%6.80%2.60%58.78%7.71%1.07%68.30%9.00%-0.70%7-4.60%-5.40%0.80%85.37%2.74%2.63%9-2.70%-2.86%0.16%107.76%6.49%1.27%11-2.80%-3.13%0.33%120.78%7.00%-6.22%Average2.88%2.44%0.44%STDEV.S()5.42%5.19%2.34%The final two rows show the average and sample standard

32、deviation of the monthly return statistics. Which is nearest to the annualized ex-post (active-based) information ratio (IR)?A. 0.404B. 0.651C. 0.950D. 1.23716. Answer: BAnnualized ex post (active based) 1R = (0.0044 x 12)/(J0|.O23 x 712) = 0.6513717 An arbitrage pricing model (APT) chftracftnz 或ces

33、s security returns as a linear function of two indexes,In thisaSCurit/s excess return inpercentage terms, ER(i), is given by E嗡)=R a + b(l) 1(1) + b(2) - 1(2), where b(i) is the factor serfiHdM to the indeA t). Weo 器 erve three securities that fit the APT model,Security 1:= a + 2.0 b(l) + 3.0= 8,0Se

34、curity 2:= a + 4.0 b| + 2.B -b= 3.5SecuyS i ER(即=a + HO - b(l| - 2.0 b(2) = -5.5Vjhich fc the specification Of the rrOdel?A. ERi) = 1.0 + 215 1律)+ 3.0 -1(2)B. ERD = 2。- 1.5 1(1) + 30 1(2)C. ERi) = 39 + 0, 111)+0.5 1(2)D、ER(D = 4.0 - 3.0- 1C1) - 1.0 1(2)17. Answer: BWe have three variables and three

35、equations: a+2.0-b(1)+3.0-b(2)=8.0a+4.0-b(1)+2.5-b(2)=3.5a+1.0-b(1)-2.0-b(2)=-5.5Solving these equations we can get: l(1)=-1.5, l(2)=3, a=2. So the model is:ER(i) = 2.0 - 1.5 b(l) + 3.0 - b(2)18 Suppose that three factors have been identified for the U.S. economy: Expected inflation rate (IR) is +2.00% Expected 10-year Treasury yield (T-NOTE) is 2.40% Expected growth in productivity (PROD) is +3.00%A stock with an expected return of 9.0%